{"id":328815,"date":"2024-08-07T11:04:13","date_gmt":"2024-08-07T03:04:13","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=328815"},"modified":"2024-08-07T11:04:15","modified_gmt":"2024-08-07T03:04:15","slug":"stock-in-focus-universal-robina-corp-urc-7-aug-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-universal-robina-corp-urc-7-aug-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Universal Robina Corp. (URC) – 7 Aug 2024 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>URC<\/td><\/tr>
Company Name<\/strong><\/td>Universal Robina Corp.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>7 Aug 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 143.71<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Maintain BUY on market dominance. As URC continues to dominate several categories which are geared towards consumption, coupled with the continued trend in margin expansion, the brightening outlook for inflation would be a positive for the company as consumer demand continues to pick-up. We therefore maintain our BUY rating for URC with a consensus Target Price of P143.71.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

Earnings beginning to pick-up, still trails estimates<\/h3>\n\n\n\n

URC posted core earnings of P6.71 Billion for the 1st half (1H) of 2024 which is 4.9% higher year-on-year (YoY) on the back of volume growth and the implementation of price increases in both their BCFG segment which posted increase in revenues, primarily driven by their international segment posting 7.7% YoY growth in constant USD terms. The volume growth of 7% across URC\u2019s business units however was offset by negative price\/mix as sugar and flour prices rose.<\/p>\n\n\n\n

Margins continue its expansion<\/h3>\n\n\n\n

We note that the continued pattern that we have been seeing from several consumer companies with regards to improvements in GPM can also be seen with URC with a substantial 197 bps expansion in margins for 1H 2024 coming out at 28.5% vs last year\u2019s 26.5% and a 140-bps expansion for 2Q24 vs 2Q23 which is a result of a combination of better mix and lower input costs. We note that despite the notable increase in URC\u2019s OPEX of 11.5% YoY driven by higher advertising and promotion expenses, they still managed to post higher operating margins of 11.7% for 1H24 which is up by 70bps alongside 2Q 2024\u2019s 30bps YoY improvement.<\/p>\n\n\n\n

Bottomline took some hits<\/h3>\n\n\n\n

The closure of URC China in the first half of 2024 resulted in a massive increase in URC\u2019s net loss from discontinued operations to P580-Million vs P14-Million last year. The company is expecting to fully wind down the business by 2025. This would allow the company to redeploy capital to higher-growth markets. Coupling this with the Impairment losses as a result of typhoon Aghon which amounted to P147-Million resulted in a slight decrease in the Net Income Attributable to Equity Holders by 1%.<\/p>\n\n\n\n

Tempering optimism<\/h3>\n\n\n\n

The company expects lower sales growth of around low-to-mid single digit due to the continued shift in consumer mix towards value alongside the delayed 2024 sugar milling season. Earnings on the other hand is expected to show double digit growth anchored on the sequential improvement in margins with the exception of SURE (Sugar and Renewables).<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>